Former FDIC Chair Blames SEC for Credit Crunch

joeydolfan · Oct 9, 2008

Financial markets are frozen throughout the world, and former FDIC Chair William Isaac puts the blame squarely on the Securities and Exchange Commission and fair-value accounting—especially the accounting method's requirement that banks "mark to market" their assets.
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"The SEC has destroyed $500 billion of bank capital by its senseless marking to market of these assets for which there is no marking to market, and that has destroyed $5 trillion of bank lending," he said.

"That’s a major issue in the credit crunch we’re in right now. The banks just don’t have the capital to start lending right now, because of these horrendous markdowns that the SEC’s approach required."
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Former FDIC Chair Blames SEC for Credit Crunch - Financials * US * News * Story - CNBC.com

FiN.in.RI · Oct 9, 2008

I wish I could say that it's one persons or one entities fault but the problem is so much more far reaching than just mark-to-market. There is plenty of blame to go around including the Fed, the SEC and the consumer.

That said, I'll be damned to understand why they haven't eliminated mark-to-market by now. It's befuddling.

joeydolfan · Oct 9, 2008

FiN.in.RI said:

I wish I could say that it's one persons or one entities fault but the problem is so much more far reaching than just mark-to-market. There is plenty of blame to go around including the Fed, the SEC and the consumer.

That said, I'll be damned to understand why they haven't eliminated mark-to-market by now. It's befuddling.
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I can understand where he is coming from and to be honest, even if the SEC re moves the mark to market rule right now I dont know if it would matter. Everyone knows the toxic assets are there on their books.

I agree with you though, lots and lots of blame to go around on this one.

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